What Is Polycab India Limited's (NSE:POLYCAB) Share Price Doing?

While Polycab India Limited (NSE:POLYCAB) might not be the most widely known stock at the moment, it saw a significant share price rise of over 20% in the past couple of months on the NSEI. With many analysts covering the mid-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. But what if there is still an opportunity to buy? Today I will analyse the most recent data on Polycab India’s outlook and valuation to see if the opportunity still exists.

Check out our latest analysis for Polycab India

What Is Polycab India Worth?

According to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average, the stock currently looks expensive. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 40.06x is currently well-above the industry average of 22.98x, meaning that it is trading at a more expensive price relative to its peers. But, is there another opportunity to buy low in the future? Since Polycab India’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

What kind of growth will Polycab India generate?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. Polycab India's earnings over the next few years are expected to increase by 46%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What This Means For You

Are you a shareholder? It seems like the market has well and truly priced in POLYCAB’s positive outlook, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe POLYCAB should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on POLYCAB for some time, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the positive outlook is encouraging for POLYCAB, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

If you'd like to know more about Polycab India as a business, it's important to be aware of any risks it's facing. When we did our research, we found 2 warning signs for Polycab India (1 makes us a bit uncomfortable!) that we believe deserve your full attention.

If you are no longer interested in Polycab India, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.